JPMorgan Chase kicked off the second quarter earnings season with bad news: The bank temporarily suspended share buybacks and fell short of analysts’ expectations for earnings and revenue growth.
Profit declined 28% from a year earlier to $8.65 billion and the bank reported earnings of $2.76 per share versus the $2.88 expected by analysts. Managed revenue clocked in at $31.6 billion, missing the $31.95 billion expected, according to Refinitiv data.
Large market swings hurt dealmaking this quarter, the bank reported. Investment-banking fees fell by 54%, more than the 47% predicted by analysts.
Shares of JPMorgan’s stock fell by about 3% in premarket trading on Thursday and are down 29% this year.
JPMorgan (JPM) is the largest US bank by assets and its earning reports are used by investors and analysts as a bellwether for how Wall Street fared over the past three turbulent months for markets and the economy.
CEO Jamie Dimon warned last month of an economic “hurricane” brewing and said that he was bracing himself for the impact of the Federal Reserve’s tighter monetary policy and rising costs of food and fuel due to Russia’s invasion of Ukraine.
In a call with reporters on Thursday morning, Dimon said he hadn’t changed his view on an upcoming recession. The Fed’s efforts could lead to a soft landing or a hard landing, he said, but there’s still a serious set of issues to contend with.
“Rates are rising because of inflation, and in my view they’ll go up more than people think,” he said. “Quantitative tightening will reduce liquidity in global markets and stock prices are down a lot.”
Markets will remain volatile for the foreseeable future, Dimon said. Still, he appeared to soften some of his earlier predictions of foul weather. Consumers are still spending money, jobs are plentiful and wages are going up, Dimon said.
“If we go into any recession, consumers are in good shape. If you spoke to businesses you’d hear CEOs say things are looking good, and I agree,” he said.
The sudden change in buyback status also worried investors. Dimon said that it was implemented to meet capital requirements and “allow us maximum flexibility to best serve our customers, clients and community through a broad range of economic environments,” CEO Jamie Dimon said in a statement Thursday. Last month the bank had to keep its dividend unchanged because of Federal Reserve regulations while other banks increased their payouts.
Morgan Stanley (MS) also reported earnings Thursday. Like JPMorgan, it missed expectations. The bank also cited a drop in investment banking revenue as the reason for its losses.